context: Industrial policy tends to lead to low-end overcapacity, especially in China, where state intervention can be massive, and local governments are incentivised to experiment and compete in implementation, leading to overlap and duplication of efforts. In artificial intelligence, private investors and firms are also keen, increasing the risk of a bubble, but also increasing the prospects of less local protectionism and better consolidation once the frenzy ends.
Artificial intelligence (AI) firms are over-valued, says Wu Jianfeng 吴建锋 State Development and Investment Corp (SDIC) Innovation Fund chief inspector (Note: SDIC is the state's largest investment holding company). Such an unhealthy climate is bad for start-ups, argues Wu, as unrealistic expectations raise the threshold to generate interest in the next funding round.
Chinese AI firms may reach a total value of C¥100 bn in 2018 and C¥160 bn by 2020, says Zhang Zijun 张梓钧 China Centre for Information Industry Development AI Industry Research Centre general director. Investors poured C¥12 bn into AI in 2017, and Q1-3 2018 investments exceeded the combined total of 2016 and 2017, adds Yicai.
The hype puts pressure on AI technologies to prove themselves in the market, says the report. In 2017, computer vision held 37 percent of the AI market, generating C¥8 bn, according to a February 2018 report by Ministry of Industry and IT's China Academy of ICT. The technology attracted C¥23 bn in 2018, a third of investments, says Yicai. New applications are being developed for autonomous driving and medical images, but security video analysis, including facial recognition, is likely to remain the tech's main application, generating 67.9 percent of income in 2017.